Quebec-based staffing operator Premier Health of America Inc. (PHA:TSX.V) reported soft financial data for the fourth quarter of 2024 as the province's Bill 10 act limiting the use of per diem, or flexible schedules, for nurses negatively impacted its operations, Leede Financial Inc. Analyst Douglas Loe wrote in a December 11 research note.
"To say that underperformance of Per Diem staffing operations is the main culprit in explaining FQ424 EBITDA is to risk understatement, as revenue for this staffing category has dropped sequentially through F2024 from CA$10.9 million in FQ124 to CA$9.5 million in FQ224 to CA$5.2 million in FQ324 and now to CA$2.9 million in FQ424," wrote the analyst, who maintained his Speculative Buy rating and a one-year price target of CA$0.50 per share.
According to the analyst, Bill 10 lowers reimbursement rates while disincentivizing hospitals/clinics from seeking out independent labor, at least in major urban areas.
"We are still optimistic that the QC Ministry of Health will see value in working collaboratively and not confrontationally with independent healthcare staffing organizations like Premier that, in our view, serve a seminal role in ensuring adequate staffing of hospitals and other healthcare facilities," Loe wrote. "We stand by our view that staffing organizations that are well-connected with professionals seeking workflow balance and hours flexibility can play a key role in the healthcare continuum-of-care, as we believe Premier has throughout its corporate history."
Company Can Contribute to Healthcare Stability, Analyst Says
Lowe said the firm believes that Premier can be "a more important contributor to stability of healthcare service in the province than Bill 10, and the Ministry that proposed it, currently contemplates."
"In F2025, we are projecting consolidated revenue/EBITDA/margin of $149.2M/ $10.9M/7.3%, increasing to $157.2M/$12.0M/7.7% in F2026 (the reference year in our PT derivation) and $166.4M/ $13.3M/8.0% in F2027," the analyst said.
To reconfigure per diem costs so they match staffing-derived revenue, the company is undertaking a revitalization of its fixed costs for that division, hoping to generate CA$4.7 million in cumulative cost synergies in F2025.
"Once fully implemented, this should put the firm on pace to achieve our F2025/26 EBITDA forecasts of CA$10.9 million and CA$12 million, respectively," Loe wrote.
According to the analyst, the company's travel nurse operations were more stable on a gross margin basis, but still down on revenue.
"Our investment thesis assumes that FQ424 revenue/gross margin/EBITDA represent the trough on financial performance and not an intermediate stage of an ongoing slide, an assertion that we believe is reasonable though when considering the focus on near-term cost rationalization that the firm is implementing this quarter and into 2025," Lowe continued.
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Disclosures for Leede Financial Inc. and Premier Health of America Inc., December 11, 2024:
Important Information and Legal Disclaimers
Leede Financial Inc. (Leede) is a member of the Canadian Investment Regulatory Organization (CIRO) and a member of the Canadian Investor Protection Fund (CIPF). This document is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate.
All information is as of the date of publication and is subject to change without notice. Any opinions or recommendations expressed herein do not necessarily reflect those of Leede. Leede cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value, and you may lose money. Leede employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients. Disclosure codes are used in accordance with Policy 3600 of CIRO.
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1. Leede and its affiliates collectively beneficially own 1% or more of any class of equity securities of the company as of the end of the preceding month or the month prior to the preceding month if the report was issued prior to the 10th.
2. The analyst or any associate of the analyst responsible for the report or public comment hold shares or is short any of the company's securities directly or through derivatives.
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The Research Analyst(s) who prepare this report certify that their respective report accurately reflects his/her personal opinion and that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies. Leede Financial Inc. (Leede) compensates its research analysts from a variety of sources and research analysts may or may not receive compensation based upon Leede investment banking revenue.
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This research has been approved by Leede Financial Inc. (Leede), which accepts sole responsibility for this research and its dissemination in Canada. Leede is registered and regulated by the Canadian Investment Regulatory Organization (CIRO) and is a member of the Canadian Investor Protection Fund (CIPF). Canadian clients wishing to effect transactions in any designated investment discussed should do so through a Leede Registered Representative.
U.S. Disclosures
This research report was prepared by Leede Financial Inc. (Leede). Leede is registered and regulated by the Canadian Investment Regulatory Organization (CIRO) and is a member of the Canadian Investor Protection Fund (CIPF). This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Leede is not registered as a broker-dealer in the United States and is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. Any resulting transactions should be effected through a U.S. broker-dealer.
